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The Pros and Cons of Using a Microloan to Finance Your Business

By Nicolas Moore | June 13, 2022

Have you ever heard of microloans and how they can be helpful to your business?

Microloans have proven to be great for businesses that need small, quick loans that can bridge them towards the next step in their plan. With the possibility of gaining help from multiple investors to fund your needs, microlending is a great way to help your business through rough patches or small expansion projects. 

What is Microlending?

Microlending, or peer-to-peer lending, is where borrowers can seek out money that comes directly from investors.

Microloans are much different from traditional loans because of who funds the money. Instead of a banking institution lending out money, an individual is directly lending the funds to the person borrowing it. It can be compared to your friend or co-worker lending you money, but they can set terms and fees involved when getting their investment back. 

Not only does microlending change where the money comes from, but it also affects the entire lending process. Instead of a lengthy and stressful approval process, you can get approved quicker since you can connect directly with the investor. Microloans allow you to plead your case about why you need the loan and get instant approval. 

Microloans are also unique because they are smaller than traditional bank loans. Banks typically do not lend below $5,000 because all loans require the same workload regardless of the amount borrowed. If you need a small loan of $1,000, a bank will most likely not loan you the money, forcing you to find another option for financing. Microloans can be a viable option in a situation such as this. 

Microloans can be as little as $200 and go up to $2,000, giving you flexibility if your business needs a small loan to help out in a tight situation. While a loan of $1,000 might not seem much, it could still make a difference in keeping your business afloat. If you need a few hundred dollars to cover some operating expenses so you can start making more money again, taking out a microloan could be your savior at that moment. 

Pros & Cons of Microloans

Microloans have many advantages and disadvantages. 


  • One of the advantages of using microloans is their simplicity and ease of approval for your business. You can get quick cash needed for your business sooner than if you were to go to a bank or traditional lender, making the process less taxing on you. Also, they help get you a small amount of money if that is all you need. 
  • Another advantage of microloans is that they can be customized to your needs. If you need more time to pay off the loan or different terms, you can work it out with the investor, unlike a bank or lender. 
  • Microloans allow your business to create a good relationship with investors that believe in your mission and overall business. Instead of looking for loans here and there, you could consistently get help from investors and pay them back while your company is more successful.
  • One more great thing about microloans is that you can still get help even with a low credit score. That is why microloans are easier to secure for your business. 


While there are multiple advantages of microloans, there are also some disadvantages that you should know. 

  • One of the disadvantages of microloans is that they are smaller than traditional loans, so they will only work for your business if you do not need a lot of money. 
  • One more disadvantage of microloans is that due to the money coming directly from investors, there could be fees when paying them back. If you have a low credit score or have taken a larger microloan, some investors will charge you more so they can ensure their investment profits. Thankfully, the fees are stated at the beginning of the loan term to figure out if you can work with that investor or not.  

Find Your Microloan Today!

If you are interested in microloans or want to learn more, then Lendee is here to help!

It is a peer-to-peer lending platform that connects investors and borrowers looking to work with one another. Lendee is unique for borrowers because instead of broadcasting their credit score to every investor, they offer a lendee score, calculated by considering their credit score, income to expense ratio, and other qualifying factors.

Lendee is available to help borrowers get the loan they need while allowing investors to get greater returns. 

Download the Lendee app today whether you are an investor or a borrower!